Colorado Real Estate Journal - June 15, 2016
Vukota Capital Management continues to grow its Colorado Springs apartment portfolio, most recently with its acquisition of the 216-unit Stratus community. The privately held investment firm paid a reported $17.38 million, or $80,439 per unit, for the community at 4255 Airport Road. In a release regarding the sale, VCM noted that the purchase price is “attractive and is at a 40 percent-plus discount to estimated replacement cost, creating a competitive barrier to entry.” VCM also noted that the acquisition presents a significant value-add opportunity to increase cash flows given that market rents based on recent lease renewals are more than 10 percent greater than current average rents. The two-story, garden-style property was sold by FPA Multifamily LLC, which had purchased the property in 2013 for $9.05 million. FPA spent more than $2.5 million in capital improvements to the 1975 apartment community, including renovations to the clubhouse, pool and fitness area, landscaping, signage and some unit renovations. In addition, the previous owner added double-pane windows, new siding and new boilers, noted Kevin McKenna of ARA Newmark. “There has been a lot of capital spent on the property in the last six to eight years,” added McKenna, who handled the sale with ARA Newmark’s Saul Levy. “The buyer stepped into, more or less, a turnkey kind of asset in which the seller had already done a lot of the heavy lifting and was now seeing significant rent increases,” said McKenna. VCM, however, plans to continue the upgrade program started at Stratus and to build upon its location near the Colorado Springs Airport. “Stratus is located in a rapidly improving area,” McKenna said of its southeast location. “There is a lot of positive economic job growth in that area with significant job announcements, including Sierra Nevada, which is going to add 2,100 jobs near there, FedEx just built a distribution facility down there and defense contractors are growing. It’s an area getting a lot of attention.” Stratus comprises 90 percent two- and three-bedroom units and was around 95 percent occupied at the time of sale. The community also features a resident lounge with Wi-Fi, laundry facilities, a picnic area and courtyards. The transaction was funded by investments of equity capital from VCM and other accredited investors, as well as mortgage financing from Freddie Mac. With the acquisition, VCM holdings total 11 properties in Colorado. Currently, VCM and its subsidiaries own and/or manage 2,500-plus apartment units. VCM’s typical property acquisitions range between 100 and 500 units, or $5 million to $50 million in purchase price. VCM’s multifamily strategy is to acquire properties in secondary and tertiary markets below replacement cost in growing supply constrained communities where, over the long term, rents are expected to increase above the rate of inflation. Other News Podoll & Associates LLC recently acquired an 8.69-acre site in Colorado Springs for $1.14 million. The land was rezoned to accommodate a used car dealership, said Mark Useman of Colorado Springs Commercial, a Cushman & Wakefield Alliance, who represented seller FN Limited Liability Co. The car dealership is expected to begin work on the property in a year. Intelligent Software Solutions Inc. recently renewed its office lease for 94,806 square feet in Colorado Springs. It renewed its lease at Tech Center I, located at 5450 Tech Center Drive. Michael Palmer of Quantum Commercial Group Inc. represented the U.S. Department of Defense tenant. MAC Colorado Springs LLC is the landlord. Time Warner Cable Pacific West LLC extended its 93,077-sf office lease at 2221 E. Bijou St. in Colorado Springs. Brian Wagner, Mark O’Donnell and Kent Mau of Newmark Grubb Knight Frank represented the landlord, CSMC 2006-C5 Bijou Street LLC. JLL’s Dan McGowan, Mike Rooks and Tom Lepry represented the tenant.